Resort condominiums seeing renewed demand but prices remain down

Biwako Urban Resort

Resort condominiums built during the peak of Japan’s bubble economy in the late 1980s are finally starting to see renewed demand. This time around the buyers are not investors, but are people looking for a permanent residence in which to spend their retirement years.

Alongside Lake Biwa’s shoreline stands the Biwako Urban Resort. The resort condominium was built between 1989 and 1991 and contains 770 units in three 15-storey towers. When it was first built, Moriyama City guidelines prohibited the units to be used for personal residences. Owners could only use them as holiday villas. Because of the ‘resort condo’ designation, the developer received several allowances including only requiring car parking for up to 50% of the apartments. The non-residence rules were also written into the building’s management bylaws, although demand from some residents has seen this clause removed from one of the three towers.

The number of residents who call this building their permanent home now numbers over 300.

Although the ban on residential use is a City-prescribed guideline, it is not an enforceable law. As a result, residents are able to register their apartment has their place of residence. However, the local council has been refusing garbage collection for several years.

Crash in property prices

Apartment prices in this building are now just a fifth of their original price when new. From around 1998 onwards, there has been growing interest from buyers looking for a permanent home. As of March 2015, there were 236 households with 325 residents registered in the building. 50 new households moved in over the past 3 years. Despite the rise in demand, sale prices have remained flat for the past four years with an average price of 89,000 Yen/sqm (around 70 USD / sq ft).  Sale prices in 2015 have been around 25 ~ 30% below prices in 2009 ~ 2010.

With nationwide vacancy rates expected to continue to grow in coming years, especially in non-urban areas, there has been a noticeable trend of local cities in resort areas welcoming permanent residents.

Resort condos in Japan saw a rush in development and sales during the 1980s, but prices plummeted following the collapse of the property bubble. In some resort areas, there is still such a lack of demand that owners cannot even give away their apartments. One of the issues with owning an apartment, particularly a resort-style one with facilities such as hot spring baths, is the high management and maintenance fees. Some resort apartments that may be listed for sale for as little as 100,000 Yen (800 USD), can cost around 450,000 ~ 500,000 Yen (3,600 ~ 4,000 USD) per year in building fees and property taxes. Buildings can become poorly maintained over the years as a number of owners fall behind in building fees, resulting in a money draining liability rather than an asset. A growing number of elderly living on meagre pensions have been moving into resort condominiums, causing issues for local towns who may be seeing a rise in population, but without any increase in the tax base. These towns are also noticing a rise in isolated deaths as the elderly owners pass away in their apartments leaving no contact details for their next-of-kin.

Biwako Urban Resort is an unusual case and could owe much of its recent demand due to its proximity to Moriyama City and its low building fees.

Source: The Kyoto Shimbun, June 10, 2015.